ETFs In Focus As IBM Posts Another Quarter Of Revenue Decline

After the closing bell on Oct 19, International Business Machines (IBM - Free Report) reported robust third-quarter 2020 results. The company beat earnings estimates but missed on revenues.

Earnings per share came in at $2.58, surpassing the Zacks Consensus Estimate by 3 cents, but declining from the year-ago earnings of $2.68. Revenues declined 2.6% year over year to $17.56 billion and fell short of the consensus estimate of $17.61 billion.

The strength in cloud computing business was unable to contribute to the revenue surprise as most of the gains were offset by the weakness in much of its other businesses. Notably, Cloud revenues increased 19% to $6 billion in the quarter.

The company is shedding its legacy business to focus on the growing cloud business. Earlier this month, IBM announced that it would spin off its managed-infrastructure business as a new publicly-traded company in a tax-free deal for IBM shareholders. The separation is expected to be completed by the end of 2021. The move will allow IBM to be "laser-focused on the $1 trillion hybrid-cloud opportunity”.

Though Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) dominate the cloud market, the spin-off would help to revive fortunes at the 109-year-old company. As the global pandemic encourages remote work, IBM is expected to gain sufficient market share from its high-margin open hybrid cloud and AI solutions.

As revenues are on a continued deceleration path, shares of IBM sank 3% in after-market hours. The stock has a Zacks Rank #3 (Hold) and a Value Score of A. It belongs to a top-ranked Zacks industry (top 29%).

ETFs to Watch

Given this, ETFs with the highest allocation to this tech giant will be in focus. Investors should closely monitor the movement of these funds and grab the opportunity whenever it arises.

First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed $1.2 billion in its asset base while trading in volume of around 92,000 shares per day. It charges 50 bps in annual fees and holds about 85 securities in its basket. Of these firms, IBM takes the top spot, making up roughly 8% of the assets.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.